Perhaps I’m lucky and have always enjoyed the luxury of believing in what I do and of being able to walk away from a job when I thought that my values were being too sorely tested.
That’s why I baulked when I heard the chairman of the Financial Services Authority blaming “political factors” for the FSA’s failure to regulate. The consequences of this being the collapse of Northern Rock, the strange never-never-land status of Bradford & Bingley, and the virtual nationalisation of Royal Bank of Scotland and Lloyds Banking Group, that new state monopoly that includes the once mighty HBOS empire.
As failures go the FSA’s track record is second to none, apart from that of the Prime Minister who was the architect of the current regulatory system.
Even so, was Lord Turner of Eccinswell justified in recently telling the Treasury Select Committee that the FSA’s scrutiny of these financial institutions was affected by a political philosophy that shouldn’t be heavy or intrusive?
“We were supervising people like HBOS within a particular philosophy of the way you do regulation which I think in retrospect was wrong”, he declared.
That to me smacks of moral relativism and falls just short of pleading the Nuremberg defence – that his predecessor John Tiner and his crew at the time were only obeying orders.
It’s curious how Paul Moore, the executive at HBOS responsible for risk, was prepared to stand up and lose his job over his concerns about the group’s risk strategy (or lack of it) while not a soul at FSA had the integrity to stand up and be counted on that or any other issue. Surely there is a bottom line somewhere where the regulator knows what’s right and wrong?
Of course it could be argued that the FSA team didn’t fully understand the issues which is equally as damning as what Lord Turner is implying, that the team may have understood the issues but weren’t prepared to go against the political flow because, one can only assume, they were scared of losing their highly paid jobs and very large pension pots.
I had hoped that Lord Turner would represent a new broom in a very dirty kitchen but on the current evidence that’s hardly the case. Indeed, the proposals he has been flouting as part of the FSA’s reform package suggest that he too has fallen victim to the same political pressure that he claims had afflicted his predecessor but this this time round it’s to come down hard on the banks and other mortgage lenders and hit them where it hurts.
On his new agenda are proposals to regulate mortgage products which is where the Treasury started out back in 2000 and then, seeing the errors of its ways, turned its attention to mortgage advice.
And in deference to Gordon Brown’s wishes we can kiss goodbye to 100% mortgages, and perhaps even 90% or 80% mortgages, leaving first-time buyers the impossible task of saving for a deposit with penally low rates of interest, or borrowing at usurious rates of interest in the unsecured market.
Both Lord Turner and his political masters have overlooked the fact that not all UK banks have failed to make the grade and that the failures weren’t brought down by defaulting borrowers but serious errors of judgement at board level and within the regulatory system.
The fall out in arrears and possessions is a result of the credit crunch impacting on the wider economy, not on the majority of lenders over-extending their credit to people wanting to be homeowners. Those same lenders are still out there trying to do a decent job for decent people, despite having to dip into their coffers to bail out the failed banks under the iniquitous terms of the Financial Services Compensation Scheme.
Sadly the FSA still seems to the problem rather than the institution likely to deliver a solution.